AAP’s decision to annul FDI in retail sets an unhealthy precedent

  • Hindustan Times, New Delhi
  • Updated: Jan 14, 2014 21:26 IST

For a capital-scarce economy, allowing overseas investors to deploy funds in high growth sectors is, perhaps, the first step in seeking to spin jobs and multiply income. Each piece of structural adjustment faces its own dynamic of resistance, pacing out its passage through departments, ministries and social and political stakeholders. Political debates in Parliament, and outside, are a manifestation of this democratic phenomenon.

The Aam Aadmi Party (AAP)-led Delhi government’s decision to ban global chains to set up superstores in the national Capital needs to be seen through the dual prisms of political need and methods of good practice. Let’s examine each of these. AAP had made it amply clear during the run-up to the assembly polls that it was not in favour of allowing foreign direct investment (FDI) in multi-brand retail. So, to that extent, the decision to prohibit foreigners from setting up supermarkets in the national Capital was an election promise and qualifies as a political obligation. That brings us to the second, and broader, question of whether it is a good practice to reverse a decision taken by a predecessor regime. The jury is still out on this with arguments flying from both sides of the fence. For one, last year, the Centre eased norms arming state governments the powers to allow or prohibit FDI up to 51% in multi-brand retail stores. States which are in favour can decide to allow such stores to be set up in their regions; those which oppose can bar such giant stores. To this extent, so goes the argument, the AAP government is well within its rights to ban FDI in multi-brand retail. But, to unilaterally annul a decision taken by a preceding government without consultations with stakeholders, besides sending out wrong signals to investors, could also set an unhealthy precedent.

Co-opting stakeholders, rather than a peremptory approach, is the hallmark of participatory democracy that gives a strong sense of empowerment to people. Modern organised retail provides the right platform to create jobs in large numbers, vital for an economy like India that is battling to claw out of a sharp slowdown. Any government should aid job creation, particularly in those areas that do not require technical and specialised skills. That’s more true for AAP, which has stormed into power fuelling aspirations for millions of unemployed. To the contrary, the Delhi government, by banning foreign retail chains, may have wasted an opportunity. Wider consultations assist in expanding the area of the possible. In governance, gradualism is more sensible than a big-bang approach.

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